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Spread betting has always proven popular with traders due to the profits you make not being taxable. It is also popular with new traders because you can bet smaller amounts instead of having to bet big sums. Brokers also do not take a commission on any profits you make through spread betting with City Index as well as other established brokers, and therefore traders are drawn to spread betting in their droves. However, it does come with high risk in losing money, which is why strategies have been developed to help avert risk and maximise profits. Let’s see what strategies are there to make use of.
Market Trends
Spread bettors are always on the lookout for potential price movements, and a market trend will have traders flocking to take advantage. A market trend will see whatever is showing a price swing have traders start betting on that market, and ride the wave of it throughout the day. If the UK announces setbacks in the Brexit deal traders could start betting against the value of the British Pound, which they suspect will take a dip on the news. The day’s trades would likely see the Pound depreciate throughout the day.
Scalping
Where Market trends see traders take advantage of a price swing until the close of the markets throughout a day, scalping sees traders making short term spread bets, closing out once they’ve made a small profit. This can be a matter of minutes, or even seconds. This requires discipline and patience from traders, as they need to be content taking many small gains instead of placing one bet over a day. Scalping is effective and helps in avoiding risk, however it also requires you to constantly be monitoring the markets to jump on an opportunity at short notice, and then close your bet moments later.
Reversals
There comes a point when a market that has been rising or falling in price will turn in the opposite direction. Traders will need to have analysed the past movements of the market, and be able to determine where the upper and lower limits of the index are. Once the price of the market reaches either end of the index traders will often reverse their trade and bet on the market going the other way.
Arbitrage Bets
Also known as hedging your bets, traders can make use of two different betting opportunities to cancel out losses. To do this you’ll have to place a single bet at each company, one with a short position and one with a long position. If you go short at the one firm and long at the other, chances are you’ll meet in the middle, but with a bit of strategising you might be able to make a few quid depending on which bet turns out more favourable.
Spread betting has all the rewards you could wish for as a trader, but does carry risk. Make use of a demo account at reputable online brokers where you are given virtual funds to play around with and get the hang of spread betting. Once you grasp the concept then head out and make some cash.
